On Target

Demand forecasting helps Curacao react to cultural shifts

Any good retailer gets to know its customers, and not just their product preferences but also who they are, where they come from and what they aspire to. This type of intimate knowledge allows retailers to forecast and meet product demand with the highest degree of accuracy.

However, getting to know your customers is not a one-shot deal. It is an ongoing effort that requires refinement and readjustment as the demographics of your customer base change, both as new customers arrive and existing customers undergo socioeconomic changes.

Curacao, a Los Angeles-based regional department store serving a primarily Hispanic customer base, uses a Web-based mapping analysis tool from marketing intelligence provider Geoscape to help analyze and keep abreast of cultural shifts among its consumers, which can have a significant impact on demand forecasting. The retailer selected the solution, SaaS-based Geoscape Intelligence System software, based upon the recommendation of marketing companies that said Geoscape solutions were able to segment customers by acculturation.

"A 2010 company review of business models included analyzing current customers, those who hadn't shopped us in the previous six months and 24 months, and those who never shopped us at all," said Rick Hutton, president, Curacao Retail Group, which operates 11 locations in Southern California and Arizona. (Stores average 100,000 sq. ft. each, and while heavy on consumer electronics and appliances also sell furniture, jewelry, cosmetics, toys and apparel.)

Using the software, Curacao also measured its penetration of its customer base within one, three, five and 10 miles of its stores. The retailer found that while it had 60% penetration within five miles of stores, it was still failing to draw a significant number of potential customers who lived near its stores.

"To grow, we needed to reach out to customers who had not considered Curacao a shopping option," said Hutton. "We needed to not just meet general needs of our existing market, but meet the needs of customers as they acculturated and not let them graduate to Best Buy and Target as their options expanded."

According to Hutton, Curacao discovered it was doing extremely well with Hispanic customers who fell into categories defined by Geoscape as recent immigrants dependent on speaking Spanish who do not speak much English at home. But the chain had room for improvement with more acculturated Hispanic consumers, meaning they are born in the United States, and celebrate Hispanic food and culture but may not speak Spanish.

As a result of the findings uncovered by the Geoscape technology, Curacao has since modified its product assortment and advertising to better attract Hispanic consumers who have become more enveloped in mainstream American culture.

"We now carry more TVs than any competitor," explained Hutton. "For computers we had carried Dell, HP and Asus, but we added Apple. For refrigerators, in the past we were known for customers buying brands like Whirlpool and Frigidaire on credit, but we added higher-end brands like LG and Samsung. LG is now the No. 1-selling refrigerator brand in our stores."

Curacao also has expanded its jewelry and cosmetics assortments to include such luxury brands as Armani, Coach and Prada at the same prices as other department stores.

"We offer the same products as other stores," said Hutton. "Our customers expect to find the best products at market price."

Curacao's highly successful private credit program, which more than 90% of customers participate in, also helps the retailer track the success of its efforts to reach a broader cross-section of Hispanic consumers.

"In 1991 less than 2% of customers who filled out a credit application in stores were born in the U.S.," said Hutton. "Last year it was more than 50%."

Curacao's implementation of Geoscape Intelligence System's analytical modules was completed in 2012, and the chain has continued making changes both in product assortment and advertising. Beyond dropping the Spanish "La" from its name last August, Hutton said there have been other adjustments to how Curacao communicates its brand to the world.

"It's more about brand, less about price advertising," Hutton said. "It's less about understanding data than about understanding how to reposition the company."

Other noteworthy changes Curacao has made to its brand image and messaging based on Geoscape analysis include introducing a new logo in January of this year, engaging in bilingual TV, print and catalog advertising, and making product knowledge part of the reward consideration for customer associates.

Hutton said demand forecasting changes have mostly been made at a corporate level, but there are some individual forecasting decisions based on local consumer preferences.

"Customers in Tucson make more cash purchases but also have higher credit lines," he added. "There is a lot of across-the-border traffic, and Mexican shoppers want U.S. brands they can't get in Mexico. Stores in San Bernardino, Anaheim and Chino carry more modern furniture. Local taste has more of an impact in furniture. In electronics, demand is the same everywhere."

Curacao plans to use Geoscape-aided analysis and insight to help it continue to open new stores based upon a thorough understanding of customer wants and needs in the area. The retailer, which is considering possible expansion into Northern California, San Diego, Texas and Las Vegas, also plans to relaunch its e-commerce operation with a new platform and expanded assortment in the next few months.

"E-commerce demand has been the same as in-store demand since we introduced e-commerce in 2009," said Hutton. "We have had direct shipment and will add in-store pickup."

Ultimately, Curacao's demand forecasting decisions will largely rest on an important piece of advice the retailer received over and over again during customer focus group conversations.

"People told us everyone knows you're a great Hispanic retailer; focus on just being a great retailer," recalled Hutton. "It really opened our eyes."

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